The charm there was to find displays that were part of some wider holiday message, so people made fun of some sort of "two reindeer rule." There also were at least two types -- some locality sponsored a display, or didn't want to, and got in trouble for selectively trying to separate church and state in that fashion (or avoid controversy).
The next generation of cases involved Ten Commandments and crosses. The latest -- in 2019 -- yet again splintered the Court, but context factored into the plurality (by Alito) too, symbols around a while and with mixed messages especially factoring in. Alito doesn't seem like someone who would craft some sort of middle path but he does have a pragmatic side to advance his ends.
The Scarsdale creche case split the Court with Powell not taking part; it eventually settled the question with some new membership in the mid-1990s. The district court in the Scarsdale case (pre-Lynch) held that a freestanding creche on public land took meaning from the land -- it was in some sense reasonably taken as "public." And, being a religious symbol, this was an illegitimate advancement of religion (later we might say "endorsement"). Some sort of disclaimer sign would not solve things.
So, the village could deny the right of a private group to place it there, even if it did allow other stuff like Girl Scouts related activity. And, that is what it did -- the two courts (intervening law leading the appellate court to reverse) spelling out the decades long growing controversy. As early as 1960, the American Jewish Congress writing a letter deeming a creche on public land as violating the principle of church and state. And, a lower court even before that -- in the 1950s -- rejected such a request.
Justice Brennan -- who years later dissented when a display with a creche was upheld -- flagged holiday displays as an issue in FN74 of his opus concurrence in the bible reading case. The Scarsdale opinions (Supreme Court evenly divided so had none) provides a few previous display cases to get you started here. Follow the links and you can find various opinions with various nuances and results. One back in 1971 involved a Christmas pageant for which a creche was singled out. A lighted cross crossed (natch) the line in 1981. But, not a religious statue back in the 1950s. Interesting proviso might have been from the 2019 case:
The only restriction against the City is that it cannot discriminate. That any statue or monument might incidentally have some religious significance cannot be held violative of the constitutional prohibitions, unless it was designed and used as a public shrine or place of worship, or for the propagation of a religious belief; or was intended to hold some other religious group in public contempt and ridicule; or designed to cause religious strife and antagonisms.
One district court rejected a challenge of a Christmas postal stamp in a verbose decision that argued that federal courts using judicial review too broadly to strike down other branches even threatened the right of the people to govern themselves (republican form of government). But, it decided in the end to go the the merits, though after some more verbiage (including how oaths, chaplains etc. show the government's contact with religion is diverse), it basically said the challenge was stupid ("remote and far-fetched as to be entitled to but scant consideration"). This was in 1967.
I think the Scarsdale district court has some bite. The people of Scarsdale through their representatives determined that a creche on public land would in some basic way be a public endorsement. It was not like the a Red Cross display or something. A back-up argument made (emphasized in the Supreme Court oral argument) was that the display was a controversial message and a freestanding display of that sort could be blocked. A person speaking in that respect was not the same thing as a display just there. That's perhaps dubious. But, the First Amendment singles out concern for religious establishments.
(Justice Stevens dissent in the 1990s case would leave open the power of the government to exclude certain controversial speech, something reflected in his opinions over the years, including his dissent in the flag burning cases. Displays left unattended very well has some implication that the government endorses the message -- the examples cited in the cases are generally of that caliber. But, religious displays would be easier. Another might be something like hateful ones like a Confederate symbol that might raise other constitutional concerns.)
The district court noted that it was this type of display that caused concerns. And, some sort of disclaimer would often not be seen while one passed by and there would be continual dispute on whether it was big enough etc. It would be a continual dispute that would result in religious entanglements. And, the community was not required to keep all displays from the village square, including thermometers for some Red Cross drive or arts and crafts stuff. (This came up again in the 1990s case and the median position went the other way -- disclaimer etc. acceptable).
Plus, there was likely only a limited number of religious displays, some religions actively opposed. This results in likely favoritism. On the other hand, the village still allowed various public displays of religious activity that did not cause similar controversy. Religious groups had meetings in parks. Carolers sang. There were invocations [at some point, problematic in my view; but put that aside]. These were personal expressions as a whole; again, the invocations would be to me a separate issue.
But, a continual presence of a creche on public land in context was a bridge too far. This in part was because the whole point was a concern to have a stronger religious symbol that in some fashion had a public imprimatur. To "keep Christ in Christmas" (see Lynch) one might say. The line there very well might be tricky, but lines always have to be drawn. A symbolic representation of a sacred event can reasonably be treated differently than a tree or Christmas lights. Others disagree, especially if it is part of a wider display. A diverse society warrants such concerns.
Context and specifics. The court of appeals again [continuing this post] overturned the district court, noting an intervening Supreme Court case, if one the advocate tried to distinguish (his oral argument time per Oyez.com was mostly spent trying to argue that public forum law did not establish a right to have freestanding controversial displays). He spoke of a creche standing alone and how in that case the local government actually supported the display. Here there was public opposition.
A later Supreme Court opinion split the justices various ways but a creche standing alone was deemed a bridge too far in that opinion out of Allegheny. As, here, the fact that there were other expressions (to quote the appeals court here) of "the Christmas Holiday season" such as a tree was not determinate. A specific "passive" symbol as noted above can be different than specific events tied to a person or bland references like "Merry Christmas." "In God We Trust" is not the same as "Our Father." It is not all/nothing. The opinion followed this approach up to a point (display not permanent etc.) but reasonable minds can disagree if they did so enough. Why not give the tie to the locality unless otherwise warranted by bias or some such?
And, the appeals court disagreed in degree about the sign: it felt it would be important to disclaim endorsement but that "size, visibility and message of an appropriate disclaimer sign or signs" should be addressed. It was concerned about how children understood the display, but argued there isn't enough evidence to find that too worrisome. So, overall, it is somewhat unclear if precedent alone determined the result here.
Over the years, I have been somewhat more accepting of the acceptance of these symbols on public property and in displays expressly supported by the government. But, I continue to think these disputes are helpful to understand and respect wider principles. The opinion referenced "Christmas hymns and carols," for instance -- well, they are mixed. We do allow Rudolph and Silent Night. Just goes to the diversity.
And, though "Christmas lobsters" (Love Actually) might seem silly, the best approach there is diverse; not just Christmas. The creche there seems more singular to me though if it is truly part of a wider holiday display, it would be a lot better. [I also covered this case four years ago here.]